steven.bray

Mar 142019
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

The authorized-user account: It’s been a trick folks with weak credit histories have used for a long time to improve their credit scores. Mortgage lenders have grown wise to this trick, and they’re finally clamping down on its use.

An authorized-user account is an account on which a consumer has signing privileges, but the consumer’s credit history wasn’t used to open it. For example, a parent might allow a child to be an authorized-user on one of the parent’s credit cards to help the child establish credit.

A few years back, credit repair companies started promoting this as a way for folks with weak credit to quickly improve their credit scores. Someone with strong credit would allow the consumer with weak credit to sign on an account, even if the two individuals had no other relationship. Unfortunately for creditors, the score improvement didn’t reflect the consumer’s true credit risk.

Fannie Mae and Freddie Mac loan guidelines now instruct lenders to carefully review loan applications for which a borrower has an authorized-user account. The intent is to weed out potential borrowers who used an unrelated individual’s strong credit to try to improve their chances for loan approval.

According to the guidelines, it’s acceptable for a borrower to be an authorized-user on an account belonging to another borrower on the loan, with the borrower’s spouse, or an account on which the borrower makes the payments.

If these situations don’t apply, the guidelines instruct lenders to review the borrower’s credit to make sure an authorized-user account didn’t have a significant impact on the borrower’s credit scores. If the borrower otherwise has weak or little credit, it’s possible the borrower’s loan request will be denied.

Mar 132019
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

Still riding the range. It’s not a bad place to be when mortgage rates are the lowest they’ve been in a year. This range has held for an unusually long time, and we’ve been looking towards this month as the time when the range finally might break down. There’s no sign of that yet, but let’s review some events that could make it happen.

US economic data probably carries the greatest weight. Most of the data this year has shown continued economic strength – until the Feb jobs report. The report didn’t just miss expectations, it was anemic. Could it be an outlier due to the government shutdown or seasonal factors? Possibly. The Jan number was oddly high. Regardless, the weak jobs report combined with this week’s tame inflation reports have bond buyers in a frisky mood, and that’s good for interest rates. Any additional weak economic data likely will get the recession whisperers going again, and rates could break lower.

The other elephant in the room is the ongoing Chinese trade talks. I still think a trade deal is likely to pump up rates a bit as it not only will remove impediments to economic growth, it will remove the uncertainty that acts like a weight on rates.

Foreign economic uncertainty carries less weight, but its pervasiveness at the moment may be giving it an over-sized effect. Brexit talks continue to flounder, and a no-deal divorce between Britain and the EU is full of unknowns. The European Central Bank last week again lowered its growth estimates and discussed stimulus measures to shore up the European economy. Chinese growth has cooled significantly, and recent data shows its manufacturing sector in contraction.

Finally, we have the Federal Reserve meeting next week. The Fed had a large part in setting up the current range with its about-face on rate hikes following its Dec meeting. Markets currently see little chance of the Fed raising interest rates soon. Should the Fed’s post-meeting announcement suggest otherwise, rates could make a quick jump higher.

Mar 052019
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

Recent data from ATTOM Data Solutions, a national property data warehouse, shows that the total number of homes and condos flipped last fall reached a 3.5-year low. The total of almost 46,000 was a 12% decrease from a year earlier.

ATTOM’s senior vice-president Daren Bloomquist suggested this could indicate a cooliing housing market as home flips are quick transactions and provide almost real-time data on the state of the market. Last fall was the third consecutive quarter of year-over-year decreases for flips. Bloomquist said the last time that happened was in 2014 after mortgage rates jumped.

For some context, flips decreased for eleven consecutive quarters preceding the housing crash, so it’s unlikely this trend is indicative of an echo crash. Like 2014, the recent swoon may be a reaction to rising interest rates, and it will be interesting to see whether flipping activity picked up this winter when rates retreated.

The report contained a wealth of interesting data on home flipping. The average gain-on-sale for home flips was $63,000, a slight decrease from a year ago when it was $65,000. This represented a 42.6% return on investment, which was a 6.5 year low and was lower than the 48.1% ROI a year earlier.

Almost half of all flips in the quarter sold for less than $200k, with most of those flips having a gross ROI of 50% or better. However, the highest ROI occurered for flips with a sales price north of $5 million.

The highest rate of home flipping occurred in AZ, TN, and NV, and the highest gross returns were in PA, OH, and KY.

ATTOM’s summary of the report

Feb 262019
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

Mortgage rates remain range-bound, and fortunately for us the range is a pretty nice place to be. Rates are the best they’ve been since last summer. At some point, the range is going to break, so let’s look at the factors that may influence that break.

Rates hit their recent peak and started heading lower last Nov in response to stock market losses and concerns about the economy. The stock market has rebounded, and recent US economic data looks pretty rosy, so we don’t have those factors working for us anymore.

Trade concerns, especially the ongoing tariff battle with China, added uncertainty to the market, which put downward pressure on rates. However, it’s looking increasing possible that China and the US will resolve their trade issues and remove that as a factor.

Concerns about global economic growth have been a factor for a while, and those concerns seem to be intensifying. Recent data from Europe, China, and Japan have indicated weakening economies, and Europe still has its Brexit headache. Remember that slowing economies lead to less demand for money, which leads to lower rates.

But I’d say the biggest factor affecting rates right now is the Federal Reserve. It was the Fed meeting in Dec that put the exclamation point on the stock market swoon, and it was the Fed’s reaction to the swoon at its last meeting that solidified the current rate range. More recently, the Fed has hinted it may start buying bonds again, which would put more downward pressure on rates.

Despite those hints, Fed head Powell has been clear that the Fed is keenly interested in economic data (both US and global) and will respond accordingly. Most of the US data released this month was polluted by the government shutdown, and it won’t be until mid-Mar until that pollution clears – which could be the time rates finally leave the range.

Big rebound in housing sentiment

 Real Estate Market, Residential Mortgage  Comments Off on Big rebound in housing sentiment
Feb 252019
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

Fannie Mae’s housing index rebounded in Jan after Dec’s big drop in sentiment. Most of the gain was the result of consumers’ confidence about their personal finances. Thirty-four percent of respondents reported their income is higher this year while only seven percent said their income has fallen. This is an 11 point improvement from the index a year ago.

The overall index, which measures how consumers feel about the housing market, rose 1.2 points in Jan. However, the index is down almost 5 points from the same time last year, a negative trend that started last summer.

Three other components of the index stood out. The net share of respondents who thinks home prices will rise fell one percent, declining for the fourth consecutive month. This component is down 22 points from the same time last year.

The net share of respondents saying mortgage rates will fall increased three points. However, this component hasn’t changed much in the last year, and the overwhelming majority of consumers still think rates will rise.

Finally, the net share who thinks now is a good time to buy a home rose four points last month to 15%. It was this component that caused the Dec index to sink.

Taken together, the positive improvements in the index may signal that consumers are sensing improving home affordability, and that could portend an active spring homebuying season.

The best day to buy a home

 Real Estate Market, Residential Mortgage  Comments Off on The best day to buy a home
Feb 192019
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

Do know which day is the best day to buy a home? Well, according to ATTOM Data Solutions, a national property data warehouse, it’s the day after Christmas. ATTOM studied closings for the last 5 years and determined that buyers who closed on Dec 26th realized the greatest discount from market value.

The purchase price for buyers on that day averaged 1.3% below what ATTOM considered the market value. To determine market value, it used a computer-based valuation model, which can have laughably inaccurate results. However, ATTOM analyzed more than 18 million transactions, so you’d expect the laughable outliers would average out.

But why that day? It might be because in order to close on Dec 26, a buyer would be submitting an offer around Thanksgiving. Those sellers who wanted to sell before the end of the year probably were getting a little more motivated to cut a deal.

Interestingly, ATTOM’s analysis showed only 10 days during the year when buyers had the upper hand getting a below market price. That’s probably a testament to the strength of the recent seller’s market. Seven of those days occurred in Dec with one day in each of Feb, Oct, and Nov.

Rate update: Investors think Fed is done raising rates

 Interest Rates, Residential Mortgage  Comments Off on Rate update: Investors think Fed is done raising rates
Feb 122019
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

The Federal Reserve gave rate watchers a great gift a couple weeks ago – assurances that it’s well aware of the potential for slowing economic growth. Markets reacted with a big rally, and analysts now predict the chances of the Fed lowering rates before the end of the year as high as the chances it will raise rates again.

However, lost in the excitement was the Fed’s reiteration that it will tweak its plans based on economic data. Two days after the Fed meeting, the Jan jobs report crushed expectations, and other economic reports showed the economy still seems to be humming along.

Investors still have other concerns: the government funding deal, the Chinese trade dispute, and weakening global growth. All have created uncertainty that’s counteracting the good news on the economy, and that seems to be keeping rates trapped in a very narrow range.

So, what to watch? Personally, I don’t think anyone in Washington wants another shutdown, and I think markets already expect the compromise to pass. Chinese trade, on the other hand, could be a market mover. As long as a trade deal remains elusive, I think rates will remain capped. If a trade deal happens, watch out for higher rates. Even then, I think global growth concerns will remain background uncertainty that keeps rates from rising too fast.

We have one other issue to watch. The Fed meets again in mid-Mar. Based on the Fed’s last post-meeting announcement and press conference, markets seem convinced the Fed has hit the pause button on tighter monetary policy. If the Fed’s dot plot in Mar continues to show more rate hikes, or if Fed governors over the next month backtrack on their earlier caution, look for rates to rise again.

Data leak exposes 24 million mortgage documents

 Uncategorized  Comments Off on Data leak exposes 24 million mortgage documents
Jan 302019
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

You may be wondering as I am about the recent data breach involving mortgage records. Unfortunately, I’ve found very little reporting about it, but what I have found is disturbing.

“Breach” probably isn’t the correct term for this event because the data was left on an unsecured server for at least two weeks until a security researcher discovered it on Jan 15th. The company responsible for the data, Ascension, was an analytics company for the mortgage industry, and the leaked data belonged several major banks as well as federal agencies including HUD.

The leak was significant – 24 million documents. The company that owned the server converted paper documents to digital records, and it’s those records that initially were exposed. The researcher who discovered the trove stated the records were not easy to follow, but research firm TechCrunch discovered Social Security numbers and other sensitive financial information and was able to verify the authenticity of the data through public records.

Ascension tracked the leak to one of its vendors, OpticsML, and it seems to be ducking the unwelcome notoriety. Ascension says it has initiated a forensic investigation and notified authorities. At least one of the impacted banks, Citi, said it’s working to identify potentially affected customers.

Rate update: Rates couldn’t care less about the shutdown

 Interest Rates, Residential Mortgage  Comments Off on Rate update: Rates couldn’t care less about the shutdown
Jan 282019
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

The end of the government shutdown removed one element of uncertainty for markets, but clearly it wasn’t a critical one as interest rates barely moved in response. I half expected a little volatility today, the first trading day after the government reopened. Instead, the day passed quietly. I suspect that’s because more important events await us this week.

First up is the Federal Reserve meeting, which ends on Wed. No one expects the Fed to change interest rates at this meeting, but pretty much everyone expects the Fed to soften its attitude towards future rate hikes. It also will be interesting to see what the Fed says about the effects of the shutdown. I suspect markets already have priced in a more dovish Fed. Thus, if the attitude, as reflected in the post-meeting announcement, hasn’t changed, watch out for higher rates.

Friday brings the Jan jobs report. No one knows exactly how the shutdown effected employment. While furloughed government workers were counted among the employed, employees of contractors that were sidelined by the funding lapse may have been counted as unemployed.

Analysts are predicting employers created about half as many jobs in Jan as in Dec; however, count me among the skeptics about whether analysts have captured the extent of the shutdown effect. One thing is likely: if the actual number of jobs differs significantly from the predictions, talking heads will do what they do best – talk – and markets will be choppy.

Finally, keep an eye on the China trade talks. Markets have been reacting to pretty much every headline the past couple weeks. That partly may have been because the shutdown bottled up economic data investors use to make trading decisions. However, I suspect markets would have been reacting anyway. Chinese economic data seems to show the trade war has significantly affected its economy. Positive headlines allow investors to think maybe the world’s economy isn’t really slowing, and equity markets rally in response. That’s been a negative for interest rates, and I suspect more positive headlines will bring more of the same.

Jan 112019
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

As the government shutdown lingers, let’s do a quick update on the effects it’s having on the mortgage world.

As I reported before, the mortgage products experiencing the greatest impact are those offered through the USDA. USDA will not issue commitments during the shutdown, meaning if you’re using a USDA loan, you’ll probably experience a delay.

But we have some positive developments. Under intense pressure, FEMA reversed its position on new flood insurance policies. The new guidance means insurers can sell new policies and renew existing ones during the shutdown. Given that the ban on new policies lasted only a few days and over Christmas, it’s unlikely it created any significant backlog. If the property you’re buying requires flood insurance, you shouldn’t experience any shutdown-related delay.

Note that despite the reversal, the National Flood Insurance Program still is living on life support – a temporary extension that expires in May.

Another positive announcement came from the IRS. As I reported before, lenders often verify an applicant’s income tax return with the IRS during the loan process. The IRS previously stated it would not process any verification requests during the shutdown. On Monday, however, the IRS announced it would resume processing requests. The IRS says it has a significant backlog, so if your loan requires an IRS verification, you still may experience a delay.